Bangkok--6 Feb--Fitch Ratings
Fitch Ratings has affirmed Thai Life Insurance Public Company Limited's (TLI) International and National Insurer Financial Strength (IFS) ratings at 'BBB+' and 'AAA(tha)', respectively; the Outlook is Stable.
KEY RATING DRIVERS
The ratings reflect TLI's sound financial performance, prudent pricing policy, market-comparable growth in premium revenues, an expanding franchise, consistent investment returns and its strong capital position. In addition, Fitch believes Meiji Yusuda Life Insurance Company (MYL, IFS: A/Negative), through its 15% stake in TLI, could provide the company with technical and operational support, and enhance its access to MYL's Japanese customers in Thailand.
TLI maintains its position as the third-largest life insurer in Thailand by total premiums, with a 14.1% market share at end-3Q16. This solid market stance is supported by a long-established franchise and extensive agency network nationwide. As such, TLI's agent forces represented 76% of its total premiums and recorded as the second-largest market share in Thailand in terms of premiums written through an agency channel at end-3Q16.
TLI's robust capitalisation had been reflected by its risk-based capital ratio (RBC) at 376% and 313% by end-2015 and end-3Q16, respectively, well above the regulatory minimum of 140%. Prism Factor-Based Capital Model's score had dropped one level to 'Very Strong' using its end-3Q16 result, due to higher insurance liabilities that resulted from a low-yield environment and more investment in equities and corporate bonds. Fitch believes TLI's full-year 2016 results will place it in the 'Very Strong' range, supported by its sound business performance.
TLI's invested asset allocation is liquid; with fixed-income securities, cash and deposits representing the majority about 82% of invested assets at end-3Q16. Exposure to equities increased from the previous year but was limited at around 10% of the portfolio in the corresponding period. Fitch believes TLI will maintain its prudent investment strategy and balance its investment returns and risks under the current low-interest-rate environment.
Fitch expects TLI's financial performance remains sound with its vigilant pricing policy, and consistent investment incomes. The company's three-year (2013-2015) average pre-tax ROA of 2.4% is comparable with that of its peers. Its gross premiums written rose moderately at about 10% (annualised) by end-3Q16, higher than an industry's growth of 7% in 2016 as forecasted by Thai Life Assurance Association.
RATING SENSITIVITIES
Key triggers for a downgrade include a drop in TLI's RBC ratio to below 250% for an extended period, and deterioration in profitability as reflected by a pre-tax ROA that stays below 1%. In addition, a weaken score under the Prism FBM could be a catalyst for negative rating action.
If Thailand's Long-Term Local Currency IDR of 'BBB+' with a Stable Outlook were downgraded, Fitch is likely to lower TLI's IFS rating.
An upgrade is unlikely in the near term as TLI's International IFS rating is at the same level as Thailand's Long-Term Local-Currency IDR. TLI's National IFS is already at the highest possible level.